Times are difficult for a lot of us these days, including how much we pay for insurance. That said, insurance is more than a commodity or a transaction—it is the act of protecting an individual or family’s assets and livelihood.
What do you really know about insurance and insurance companies?
Insurance companies may seem to want to know a lot about you—how many accidents you’ve had, how you’re driving, where your home is located, and more. That’s not surprising…or a bad thing. Insurance underwriters need to fully understand what kind of risk you represent; that’s their business.
Insurance has been around since approximately 1750 BC. The concept was simply to spread risk in case of disasters. It was essentially a pool of many people, investing to protect themselves and each other from large, often unexpected financial setbacks. That’s still the basic concept today but with a lot more complexity and sophistication involved.
Why have your premium costs gone up when you haven’t filed a lot of claims?
Premium costs are driven by a variety of factors:
- Insurance is based on the law of large numbers. When losses increase because of frequency, severity, or both, everyone’s premiums increase to offset those losses.
- Inflation has driven cost increases in what we pay for housing materials, car parts, and labor. Fuel and transportation costs are also up. Many states have experienced double-digit increases in the costs of home replacement.
- Vehicle repair costs have skyrocketed, in part because of how complex cars have become in the attempt to improve safety. That results in higher premium costs for homeowners and drivers.
There is also the problem of “social inflation”— causes that are interrelated and often hard to manage. This includes more lawsuits, increased size of jury awards, courts and juries favoring plaintiffs, a growing distrust of large corporations, shifts in regulatory and legal environment, and more. These drivers have pushed claim costs higher and the natural catastrophes that have ravaged our country and other parts of the globe more and more frequently have contributed greatly to rising insurance costs. Whether or not one believes that climate change is the cause, it affects insurance premiums.
You have actions you can take.
Having an expert team to provide guidance and support while navigating the insurance landscape is critical to helping you make sure things are properly protected when you need them most. Buying on price alone won’t get you the coverage you need and probably won’t save you money in the long run. And working with a qualified, experienced insurance consultant helps you be assured that you’re talking to the right providers, looking for the right coverage, and presenting yourself as a secure risk. According to a 2023 Marsh McLennan study, some individuals and families often paid the same premiums and obtained less coverage. In other words, they were overpaying to be underinsured.
Here’s where an insurance advisor can help:
- Assessing and analyzing your risk so you have a better understanding of what kind of coverage you need.
- Presenting you with the right provider and coverage options so you can make a more informed decision.
- Helping you analyze what is necessary to modify, refine, repair, and maintain your home and your car to secure the best rates.
- Providing you with the tools to help you change behaviors that will help lower your costs.
- Working with you to better understand the technology offered by providers—apps and tech that track your driving, monitor your electrical system, check your water usage for leaks, and more.
It’s all about helping you protect your future insurability by making sure you are as resilient (aka more insurable) as possible.
Rick Kaufman, CPRIA
Insurance Advisor, Private Client Group – AmeriStar Team
Marsh & McLennan Agency LLC
T 763-542-8377 | C 763-221-7000
815 East Wayzata Blvd, Wayzata, MN 55391
Rick.Kaufman@MarshMMA.com
Sources:
- How Does Inflation Affect Insurance Rates?
- 4 Social Inflation Drivers Contributing to Rising Claim Costs
- Disaster Risk and Rising Home Insurance Premiums
